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Bulking Up With DirecTV Will Help It Squash Programming Costs-AT&T

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The guys who sell you pay TV say they wish they didn’t have to keep raising your rates. It’s just that the guys selling pay-TV programming keep raising their rates.

In theory, one way to stop or slow those hikes would be for the pay-TV guys to get much bigger, so they can get more leverage with the programming guys. That’s the theory behind the proposed Comcast-Time Warner Cable deal, and with the AT&T-DirecTV deal.

Today, AT&T spelled out its argument with a bit more detail to investors, via a document filed with the Securities and Exchange Commission.

The most important number: AT&T figures that adding DirecTV’s 20 million satellite TV customers to AT&T’s pay-TV subscriber base of six million will give the company enough clout to lower programming prices by 20 percent.

That number is particularly important to AT&T, because there isn’t a lot of other significant cost-cutting it could do after buying DirecTV, since the business has so little overlap. So if AT&T is going to save $1.6 billion a year in three years, as it promised originally, a lot of that is going to have to come from the content guys.

Note that this doesn’t mean AT&T has any plan to lower your pay-TV bill. For starters, it says some of that money will go to funding new broadband offerings it is going to sell to rural residents — a measure that’s supposed to make the merger more palatable to regulators.

And when was the last time you heard of a pay-TV company passing along the savings to you, period?

Note also that AT&T has to be politic about the way it describes the new bargaining power it will have after a deal. It can’t say, for instance, that “we will finally have enough weight to stop getting crushed by ESPN and Fox when we negotiate — we’ll have Comcast scale and we’ll get Comcast deals, at the very least.”

Instead, it has to argue that its new size will “give us the ability to offer programmers better value.”

That sounds better, right? Look for even less threatening language when AT&T files documents with federal regulators this week, explaining why the deal should be approved.

source: recode

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